Electronics contract manufacturing projected to grow modestly

SAN FRANCISCO—Outsourced electronics manufacturing is projected to grow moderately in 2013 despite lingering weakness in the global economy and continuing uncertainty in technology markets, according to market research firm IHS iSuppli.

According to IHS, OEMs will increase their outsourcing activities to capitalize on opportunities for expansion across industries including consumer electronics, industrial electronics and automotive electronics.

Thomas Dinges, CFA, senior principal analyst for the IHS Outsourced Manufacturing Intelligence Service, said through a statement that contract manufacturers and original design manufacturers are giving OEMs in multiple industries the capability to expand into new markets, including smartphones, tablets and industrial electronics. Dinges said he expects OEMs to continue to take advantage of outsourced manufacturing.

“However, the largest risk at this point is the potential for a major economic dislocation, which could easily derail market growth this year,” Dinges said. Potential economic troubles that could undermine market growth include the sovereign debt crisis in Europe and the U.S. response to realigning its long-term spending trajectory, Dinges added.

Revenue for the worldwide outsourced manufacturing industry is forecast to reach $404.5 billion in 2013, up 4.5 percent from $387 billion last year, according to the IHS Outsourced Manufacturing Intelligence Service. Projected growth is down slightly from a previous IHS estimate of 5 percent, IHS said. By 2016, the firm expects outsourced electronics manufacturing revenue to grow to nearly $452 billion.

IHS said it expects the industry attempt to balance two key trends in 2013, each likely to pull in the opposite direction: OEM customers wishing to lower their costs on one hand, versus outsourced manufacturing suppliers hoping to see improved cash flow on the other.

Customers will want to know what price is considered fair to pay an outsourced supplier in order to make their product, IHS said, while suppliers’ concerns will revolve around how to reduce inventory in order to achieve a and how to do more with less, according to IHS.

While many in the industry are wondering what will be the next big player to drive outsourced manufacturing, IHS said the answer is currently unknown. Related stories: